Consumer Shift to Individual Health Care Coverage Gives Insurers Free Rein

Americans could find themselves in more medical debt as employer-sponsored health coverage declines and some elected officials push for more consumer-driven health care plans.

According to a report by Families USA, insurance companies in most states are free to deny health coverage to people with pre-existing conditions and refuse to pay for services needed to treat common ailments. The report also found that insurance companies are allowed to tack on huge premium surcharges for people with family histories of health problems, yank coverage and deny payment when consumers face hefty medical bills.

“Moving people from employer-sponsored group coverage to individual insurance, especially in a more deregulated context, would make a bad situation worse for health care consumers,” Ron Pollack, executive director of Families USA said in a press release. “It would mean that more and more consumers would fall prey to abusive practices of too many insurance companies.”

According to the survey, only five states forbid insurance companies from cherry-picking the healthiest consumers and excluding everyone else from coverage. Thirty-five states and the District of Columbia, have no limits on how much insurers can raise premiums based on an individual’s health status. Six states have limits, but still allow dramatic variations in premiums, according to the June report, "Failing Grades: State Consumer Protections in the Individual Health Insurance Market."

Families USA also found that:

– In 21 states and the District of Columbia, insurers can exclude coverage for pre-existing conditions, such as cancer and heart ailments, for more than one year.
– In 44 states and the District of Columbia, insurers can revoke an individual’s health insurance policy without advance review by the state.
– In 29 states and the District of Columbia, insurers are allowed to deny legitimate claims of policyholders who are up-to-date with their premium payments by digging back years into their medical history and alleging that they failed to disclose, or should have known about, a pre-existing condition.
– In 45 states and the District of Columbia, insurers do not have to spend at least 75 percent of premium revenues on health care, which allows insurers to retain those revenues for profits and non-health care expenses.
– In 20 states and the District of Columbia, insurers can set and raise premiums without meaningful oversight.

“There are two important lessons to be learned from this survey,” according to Pollack. “First, the individual health insurance market has many more abuses than the group coverage market. Second, the federal government should establish some meaningful protections that would apply nationwide and that would curb the most common and harmful abuses by insurance companies.”

Families USA is a non-profit, non-partisan organization for health care consumers. Its report on insurance company practices is based on a survey of all state insurance departments and a compilation of the laws that each state has in place to protect health care consumers.